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Income Tax Appellate Tribunal, ‘’ B’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-8, Ahmedabad, dated 02/11/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2008-2009.
The Revenue has raised the following grounds of appeal:
1. That the Ld.CIT(A) has erred in law and on the facts in quashing the assessment order dated 10/03/2015 passed u/s.143(3) r.w.s 147 of the I.T Act, 1961. Therefore order of ld.CIT(A) be set aside and assessment order dated 10/03/2015 may be restored.
3. The only issue raised by the Revenue is that the Ld. CIT-A erred in holding the assessment framed under section 143(3) read with section 147 of the Act as unsustainable in the absence of issuance of statutory notice under section 143(2) of the Act upon the assessee.
4. The assessee before the Ld. CIT (A) has raised the objection upon validity of the impugned assessment on the ground that the statutory notice under section 143(2) of the Act was not issued upon it. Accordingly, the assessee claimed that the assessment framed under section 143(3) read with section 147 of the Act vide order dated 10-03-2015 is not sustainable and thus liable to be quashed.
4.1 The assessee also submitted that the fact of non-issuance of notice under section 143(2) of the Act was also admitted by the AO in his remand report dated 8-8-2018. Likewise, such defect i.e.non-issuance of notice under section 143 (2) of the Act cannot be cured under the provisions of section 292BB of the Act.
4.2 The Ld. CIT-A after considering the submission of the assessee concluded that the assessment framed under section 147 read with section 143(3) of the Act is invalid in the absence of statutory notice to be issued under section 143(2) of the Act.
Being aggrieved by the order of the Ld. CIT-A, the Revenue is in appeal before us.
The Ld. DR before us submitted that the assessee did not raise any objection on the issuance of notice under section 143(2) of the Act during the assessment proceedings. Therefore the assessee is precluded from raising such objection during the appellate proceedings in pursuance to the provisions of section 292BB of the Act.
6.1 It was also pointed out that the assessee was required to furnish the return of income in response to the notice issued under section 148 of the Act within 30 days but the assessee failed to do so. In other words, the assessee has filed the return of income beyond the time prescribed in the notice issued under section 148 of the Act.
On the other hand, the Ld. AR for the assessee before us submitted that the assessment order was framed under section 143(3) read with section 147 of the Act without issuing notice under section 143(2) of the Act. Therefore, the assessment under consideration is invalid and liable to be quashed. The learned AR reiterated the contentions made before the learned CIT (A).
The ld. AR and the Ld. DR before us vehemently supported the order of the authorities below as favourable to them.
We have heard the rival contentions and perused the materials available on record. The issue in the instant case raises two situations as detailed under: 1- Whether the assessment made under section 143(3) read with section 147 of the Act without issuing the notice under section 143(2) is valid. And 2- Whether the provision of section 292BB is attracted in the given facts and circumstance so as to make the assessment valid. 9.1 Admittedly, the return was filed by the assessee in response to the notice issued under section 148 of the Act. The return filed under section 148 of the Act is deemed to have filed under section 139 of the Act. Therefore all the provision specified under section 139 of the Act comes into play to a return filed under section 148 of the Act. The relevant provisions of section 148 of the Act read as under: [Issue of notice where income has escaped assessment.
[(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve49 on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 :] 9.2 We further note that the expression used under section 148 of the Act i.e. “so for as may be” has been interpreted by the Hon’ble Apex court in the case of R Dalmia Vs. CIT reported in 236 ITR 480, that once the return filed under section 148 of the Act then in making the assessment and reassessment under section 147 of the Act the provisions as specified under section 139 of the Act has to be followed. The relevant extract of the judgment is reproduced as under: “It is no doubt that assessments under section 143 and assessments and reassessments under section 147 are different, but in making assessments and reassessments under section 147 the procedure laid down in sections subsequent to section 139, including that laid down by section 144B, has to be followed”
9.3 From the above judgment, there remains no ambiguity that the procedural provisions for making the assessment under section 143(3) of the Act has to be followed. Therefore, it is mandatory upon the Revenue to ensure the service of notice under section 143(2) of the Act even in the assessment framed under section 147 of the Act.
9.4 We also find support and guidance from the order of Special Bench of Delhi in the case of Raj Kumar Chawla v/s ITO reported in 145 Taxman 12 wherein it was held as under: “Section 148 does not provide any methodology for computing the income on reassessment or assessment. On the contrary, it creates a legal fiction that such return shall be treated as one made under section 139. By the creation of such legal fiction all the procedures prescribed in and subsequent to section 139 automatically apply in toto. It is a settled principle that a legal fiction has to be taken to its logical conclusion and, therefore, what is valid for a return under section 139 will be valid with equal force to a return filed under section 148. Therefore, the proviso will apply to a return filed in response to notice under section 148. Clause (b) of section 158BC specifically talks of the applicability of section 142, sub-sections (2) and (3) of section 143. There is an omission of sub-section (1) of section 143. This Chapter clearly prescribes its own return, form of own methodology for computation of income but falls back on the provisions of sections 142, 143 and 144 etc., only for procedural aspect. If the proviso is made applicable, then a clash erupts between the provisions of Chapter XIV-B with section 143(2) as the assessment is mandatory under this Chapter. [Para 31”
9.5 We also find support and guidance from the judgment of Hon’ble Kerala High Court in the case of Lally Jacob v/s ITO reported in 197 ITR 439 wherein it was held as under: “A reading of sections 147 and 148 makes it clear that, at any rate, an assessment for the first time made by resort to section 147 is a regular assessment. Section 148 enjoins the Income-tax Officer before making an assessment under section 147 to serve a notice on the assessee containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139. The further provision in that section is very significant which provides that the aforesaid notice has to be treated as if it is a notice under section 139(2) and that all the provisions of the Act shall apply to the subsequent procedure and the final assessment. In other words, the notice issued under section 148 has to be deemed to be a notice under section 139(2) and, if the other provisions of the Act have to be applied, an assessment in pursuance of that can be made only under section 143 or section 144. We were not shown any other provision by which the Income-tax Officer is authorised to make an order of assessment under the Act. The provisions contained in section 140A also give an indication that an assessment made in pursuance of a notice under section 148 is a regular assessment under section 143 or section 144, for section 140A(2) provides that any admitted tax paid in pursuance of section 140A(1) shall be deemed to have been paid towards the regular assessment under section 143 or section 144. It is pertinent to note that section 140A(1) deals with a return required to be furnished under section 139 or section 148. That makes the provision clear that an assessment made under section 147 also will be a regular assessment under section 143 or section 144. Accordingly, we hold that any assessment made for the first time by resort to section 147 will also be a regular assessment for the purpose of invoking section 217 of the Act. With great respect, we dissent from the view expressed in certain decisions referred to earlier in this judgment which take a contrary view." (p. 452)”
9.6 We also find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of ITO versus Smt. Sukhini P. Modi. Reported in 367 ITR 682 wherein it was held as under: “8. The apex court in the case of Asstt. CIT v. Hotel Blue Moon [2010] 321 ITR 362/188 Taxman 113 has considered the very issue. The apex court held that the Assessing Officer has to necessarily follow the provisions of section 142 and sub-sections (2) and (3) of section 143. It did not accept the submission of the Revenue that the requirement of the notice under section 143 can be dispensed with and the same is mere procedural irregularity. In the words of the apex court, it is held as under (page 370) : "The case of the Revenue is that the expression 'so far as may be apply' indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression' so far as may be apply'. In our view, where the Assessing Officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143."
9. In the instant case, we notice that both the Commissioner of Income-tax (Appeals) and the Tribunal have held that the procedure prescribed of issuance of notice under section 143(2) has not been followed at all. This realm of fact has not been disputed by the Revenue. In view of this decision of the apex court, the assumption of the jurisdiction of issuance of notice of reopening itself would not be sustainable, and, therefore, this court does not require to indulge into the concurrent findings of both the authorities. In the absence of fulfilment of mandatory requirement of issuance of notice under section 143(2) both the authorities rightly and validly held against the Revenue and in favour of the assessee. Resultantly, the tax appeals deserve no further consideration and are dismissed with no order as to costs.”
9.7 Thus in view of the above we conclude that the AO was under the obligation to issue a notice under section 143(2) of the Act for making the assessment or reassessment as the case may be under section 147 of the Act. But the AO has not done so. Accordingly, the order framed under section 143(3) read with section 147 of the Act becomes invalid.
9.8 We further note that the provisions of section 292BB of the Act deals with the situation where notice is not served or not served on time or served in a improper manner viz a viz the assessee does not raise objection before the completion of the assessment. As such, the provision of section 292BB of the Act does not deal about the issuance of notice. In the present case, the issue is whether the assessment framed under section 147/143(3) of the Act is valid without the issuance of the mandatory notice under section 143(2) of the Act. Accordingly we hold that, the provision of section 292BB of the Act does not extend any benefit to the Revenue.
9.9 In holding so we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of PCIT v/s Marck Biosciences Ltd. reported in 106 Taxmann.com 399 wherein it was held as under; “The facts as emerging from the record show that it is an admitted position that no notice under section 143(2) had been issued after the assessee informed the Assessing Officer to treat the earlier return of income as the return filed in response to the notice under section 148 of the Act. In other words, no notice under section 143(2) was issued after the filing of the return of income. The question that, therefore, arises for consideration is whether the assessment order framed under section 143(3) read with section 147, would be rendered invalid in the absence of a notice under section 143(2) of the Act?
On a plain reading of provision of section 143(2), it is manifest that it contemplates that when an assessee files a return under section 143 and the Assessing Officer finds that any claim as described therein is inadmissible, he is required to serve a notice to the assessee specifying particulars of such claim and a date on which he should produce or cause to be produced, any evidence or particulars specified therein on which the assessee may rely in support of such claim. Further, from the language employed in section 292BB of the Act, it emerges that a notice would be deemed to be valid in the three circumstances provided therein, namely, where the assessee has participated in the proceedings it would not be permissible for him to raise objection that (i) the notice was not served upon him; or (ii) was not served upon him in time; or (iii) was served upon him in an improper manner Thus, all the circumstances contemplated under section 292BB of the Act are in a case where a notice has been issued, but has either not been served upon the assessee or not served in time or has been served in an improper manner. The said provision clearly does not contemplate a case where no notice has been issued at all In the facts of the present case, if the contention of the assessee were to be accepted, it would amount to dispensing with the notice under section 143(2) of the Act in view of the fact that it is an admitted position that no such notice had been issued after the return of income was filed by the assessee. After the filing of the return of income, unless a notice under section 143(2) of the Act is issued to the assessee, he would have no means of knowing as to whether or not the Assessing Officer has accepted the return of income as filed by him. As held by the Supreme Court, omission to issue a notice under section 143(2) is not a procedural irregularity and is not curable. It is, therefore, mandatory to issue notice under section 143(2) of the Act. Section 292BB provides for a deeming provision that any notice under any provision of the Act, which is required to be served upon the assessee, has been duly served upon him in time, in accordance with the provisions of the Act. This section would be applicable where a notice has, in fact, been issued and a contention is raised that such notice has not been served upon the assessee or has not been served in time or has not been served properly, namely, where there is a defect in the service of notice. This provision does not apply to a case where no notice has been issued at all. In the facts of the present case, at the cost of repetition, it may be stated that no notice under section 143(2) has been issued after the assessee had filed its return of income and hence, section 292BB would not be attracted. In the light of the fact that non-issuance of a notice under section 143(2) is not a procedural irregularity, the same cannot be cured under section 292BB of the Act and hence, the assessment order passed without issuance of notice under section 143(2) would be rendered invalid. The Tribunal as well as the Commissioner (Appeals), therefore, did not commit any error in holding that the notice issued prior to the filing of the return of income was invalid and that, in absence of a valid notice under section 143(2) the assessment order was rendered invalid.”
9.10 We also find important to refer the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Panorama Builders Pvt. Ltd. reported in 45 taxmann.com 159 wherein it was held as under: “14. Therefore, we are of the considered opinion that section 292BB does not apply to issuance of notice, neither it cures the defect or enlarges statutory period where a mandatory notice under section 143(2) of the Act is required to be issued within limitation fixed under the Act. In absence of issuance of the notice under the proviso to section 143(2) of the Act within a period of 12 months from the end of the month in which return was furnished by the assessee, the proceedings initiated by the Assessing Officer with regard to block assessment period 1.4.1997 to 25.7.2002 on the basis of notice issued on 6.7.2006 under section 143(2), after about 20 months, was time barred and the entire proceedings in pursuance of such notice is null and void.”
9.11 In view of the above, we conclude that it was mandatory to issue the statutory notice under section 143(2) of the Act within the prescribed time and such defect cannot be cured under the provisions of section 292BB of the Act. The Ld. DR has also not brought anything on record contrary to the arguments advanced by the Ld. AR for the assessee. Thus in the absence of the statutory notice, the assessment framed under section 143(3)/147 of the Act is not sustainable. Hence the ground raised by the Revenue is dismissed.
In the result the appeal filed by the Revenue is dismissed.
Order pronounced in the Court on 28/06/2021 at Ahmedabad.